Par building has offset many CDO collateral losses, primarily through the purchase of rated securities priced well below par.

Fitch reported that the May delinquency index was relatively stable at 7.9%, as a result of the removal of credit impaired assets and despite eight new delinquent loans entering the commercial real estate loan (CREL) CDO delinquency index. This number is a slight increase from last Aprils 7.8%.

Currently, 11 of the 35 CREL CDOs rated by Fitch are failing at least one overcollateralization test.

Fitch said it considers all losses to par in its evaluation of the credit enhancement available for each CDO tranche. Realized losses to the collateral have been occurring in three different ways: trades of impaired assets, repurchases, and discounted payoffs.

Loans backed by interests in land continue to represent the highest percentage of assets in the CREL delinquency index at approximately 30.1%, up slightly from last months 27.7%. Multifamily is the next highest percentage at 21.1%.

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